The Gap 2008 Annual Report Download - page 31

Download and view the complete annual report

Please find page 31 of the 2008 The Gap annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 94

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94

Macroeconomic conditions deteriorated in the third quarter of fiscal 2008 and continued in the fourth quarter. Net
sales for the fourth quarter of fiscal 2008 were down 13 percent from the prior year comparable period. Despite
this, our cash flow generation remains healthy and we have a strong balance sheet. As of January 31, 2009, cash,
cash equivalents, and restricted cash were $1.8 billion and long-term debt of $50 million, classified as current, was
repaid in March 2009. We believe our cash balances and cash flows from operations will be sufficient for the
foreseeable future. During this challenging economic environment we are focused on the following priorities:
• consistently delivering product that aligns with our target customers;
• improving customer experience and continuing to invest in the store fleet in a manner that supports
improvement in return on invested capital;
• managing inventory to support a healthy merchandise margin;
• maintaining a focus on cost management; and
• generating strong free cash flow.
Results of Operations
Net Sales
Net Sales by Brand, Region, and Reportable Segment
Net sales primarily consist of retail sales, online sales, and shipping fees received from customers for delivery of
merchandise. Outlet retail sales are reflected within the respective results of each brand. Fiscal years ended
January 31, 2009 (fiscal 2008) and February 2, 2008 (fiscal 2007) had 52 weeks. Fiscal year ended February 3, 2007
(fiscal 2006) had 53 weeks. Net sales numbers for the fourth quarter and year for fiscal 2006 include this additional
week; however, comparable store sales calculations exclude the 53rd week. Net sales for the additional week in
fiscal 2006 were approximately $200 million.
We identify our operating segments according to how our business activities are managed and evaluated.
Beginning in the fourth quarter of fiscal 2008, we have two reportable segments: Stores and Direct.
19